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Stocks

China central bank allays liquidity fears, lifts shares

China's central bank has reassured financial markets that it will provide enough liquidity to support economic growth. The comments have eased investors' fears of a credit crunch, ending a week of panic selling.

The People's Bank of China said at a news conference Tuesday that the risks to banking liquidity are manageable and that surging interbank lending rates are the result of seasonal factors which will vanish soon.

In addition, China's central bank reassured financial markets that it would guide market rates to reasonable levels supporting economic growth in the world's second-largest economy.

Fears of a liquidity crisis in the Chinese banking system have resulted in panic selling in Asian stock markets, driving down share prices by more than 10 percent within the past two days. China's problems were compounded by concerns that the US Federal Reserve might prematurely end its monetary stimulus after Fed chairman Ben Bernanke said last week the bank's bond-buying program would end next year.

On Tuesday, the comments offered some reassurance to global equity markets, lifting shares off post-financial crisis lows.

Noting that the markets were very reactive to the central banks' comments, Newedge strategist Neil Marsh told Reuters news agency that he was hopeful markets would calm down and begin steadily increasing again over the next week.

Chinese stock markets already pared losses of up to 6 percent in early trading on Tuesday, closing just 0.3 percent lower. European shares also rebounded with Britain's FTSE 100 rising out of a five-and-a-half-month low posted Monday.

uhe/dr (dpa, Reuters)

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